Sell Home Australian Debunking the Myth of Selling Your Home When Moving into Aged Care

Are you considering moving into aged care but worried about having to sell your home? Many people believe that selling their home is a requirement when moving into aged care, but in reality, it’s a myth. The decision to sell your home or keep it is entirely up to you. However, before making a decision, there are a few important factors to consider. In this article, we will explore the assessment process for determining aged care costs, the treatment of your home for pension calculations, and the reasons why most people choose to sell their homes. By understanding these aspects, you can make an informed decision that aligns with your financial goals and estate planning wishes.

How Your Home is Assessed for Aged Care Costs

When it comes to calculating the amount you can contribute towards your aged care costs, the value of your former home is capped at $178,839, unless a protected person lives there. A protected person includes your partner or dependent child, a carer who is eligible for an Australian Income Support Payment and has been living in the home for at least two years, or a close relative who is eligible for an Australian Income Support Payment and has been living in the home for at least five years.

If your home is worth less than the $178,839 cap, the market value of the home will be used in the assessment. However, in most cases, the market value of the home will be far greater than the cap. It’s important to note that these special rules only apply to your former home. If you choose to sell your home, the amount of assets and potential income included in the aged care assessment will increase.

The aged care means test works as follows:

• For a single individual, the means test includes 50 cents per dollar above $28,974.40 per year.
• For a member of a couple, half of the combined income and assets are assessed. The means test includes 50 cents per dollar above $28,454.40 per year.
• The assets test includes 17.5% of assets between $52,500 and $178,839.20, 1% of assets between $178,839.20 and $431,517.60, and 2% of assets above $431,517.60.

If your calculated amount is $60.74 per day or less, you are considered a low-means resident. If your calculated amount is more than $60.74 per day, you will pay the market price for your accommodation, and the Means Tested Care Fee will be the amount above $60.74 per day. There is an annual limit of $29,399.40 that applies to the Means Tested Care Fee, and a lifetime limit of $70,558.66 on means-tested fees across Home Care and Residential Aged Care.

Treatment of Your Home for Pension Calculations

Similar to the aged care assessment, your home receives special treatment in calculating your Age Pension. Under the pension assets test, the full value of your home is exempt for two years from the date you or your partner leave the home, whichever is later.

After the two-year exemption period ends, the home is included in your assessable assets at the market value. However, your pension assessment changes from a homeowner to a non-homeowner, giving you an asset test threshold and cut-off that is $216,500 higher.

It’s important to note that if you receive rent from your home, it is considered assessable income for both pension and aged care means tests. Additionally, there are special tax treatments for your former home. As a general rule, you can keep the main residence Capital Gains Tax (CGT) exemption on your former home for six years after moving into aged care if the property is rented. The tax implications for you and potential inheritors of the home can be complex, so seeking specialist advice is recommended.

Why Do Most People Choose to Sell Their Homes?

Despite the special concessions and treatments for your home in aged care and pension calculations, many people still choose to sell their homes when moving into aged care. This is often because the former home represents the majority of their wealth, and selling it is necessary to meet their cash flow needs.

When choosing to pay for aged care accommodation, the daily payment option is available. However, the interest rate is 4.07% per annum. For example, a $500,000 accommodation deposit (RAD) would have an equivalent daily payment (DAP) of $20,350 per annum. When this is added to the basic daily fee, means-tested care fee, and any additional services, the annual cost can easily exceed $50,000.

Considering the high costs associated with aged care, individuals with a home and a small amount of money in the bank may feel compelled to sell their homes. However, it’s essential to crunch the numbers and consider the potential impact on estate planning wishes before making a decision. The treatment of your home is unique, and once it’s sold, it’s too late to take advantage of the special concessions and treatments.

To help you make an informed decision, consulting a Retirement Living and Aged Care Specialist® adviser is highly recommended. They can assist in crunching the numbers and provide expert guidance tailored to your specific circumstances. Selling your home is not a requirement when moving into aged care, and understanding the financial implications will empower you to make the best decision for your future.

In conclusion, selling your home when moving into aged care is not a mandatory requirement. The decision to sell or keep your home is entirely up to you. By understanding the assessment process for aged care costs, the treatment of your home for pension calculations, and the reasons why people choose to sell their homes, you can make an informed decision that aligns with your financial goals and estate planning wishes. Seek advice from a Retirement Living and Aged Care Specialist® adviser to ensure you have all the necessary information to make the best choice for your future.

Find a Retirement Living and Aged Care Specialist® adviser at https://downunderrealty.com.